Canada (National Revenue) v. 9183-4507 Québec Inc

Canada (National Revenue) v. 9183-4507 Québec Inc

The Court found the Minister fulfilled the duty of frank and full disclosure, the evidence established the 2007 transactions were artificial tax planning producing an apparent capital loss and the related companies were alter egos used to defeat tax obligations; the applicants failed to show reasonable grounds that collection would not be jeopardized by delay; lifting the corporate veil and issuing a final garnishment order was justified; the appeal of the prothonotary was moot due to waiver and was dismissed.

Citation
2015 FC 901
Parties
Applicant/minister: Her Majesty the Queen (Minister of National Revenue); Respondent/debtor: 9183-4507 Québec Inc.; Third Party: 9183-4564 Québec Inc.; Garnishee: Company Trust Royal; Garnishee: RBC Philips Hager and North Services-Conseils et Placements Inc.; Garnishee: Gestion Placements Desjardins
Court
Federal Court
Jurisdiction
Canada
Judgment Date
28 July 2015
Procedural Posture
Income Tax Jeopardy Collection and Garnishment Review; Appeal Under Federal Courts Rules / Motions Heard and Judgment on Review of Jeopardy Collection and Garnishment Orders (final Disposition)
Outcome
Applicants' motions dismissed; final order of garnishment granted; costs awarded jointly and severally against 9183-4507 Québec Inc. and 9183-4564 Québec Inc.
Legal Topics
Jeopardy Collection, Garnishment, Lifting Corporate Veil, General Anti Avoidance Rule (gaar), Frank and Full Disclosure, Affidavit Substitution
Source Language
English
Tax Law Civil Procedure Corporate Law Jeopardy Collection Garnishment Lifting Corporate Veil General Anti Avoidance Rule (gaar) Frank and Full Disclosure +1 more

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Parties

Her Majesty the Queen (Minister of National Revenue)

Applicant/minister

9183-4507 Québec Inc.

Respondent/debtor

9183-4564 Québec Inc.

Third Party

Company Trust Royal

Garnishee

RBC Philips Hager and North Services-Conseils et Placements Inc.

Garnishee

Gestion Placements Desjardins

Garnishee

Procedural Posture

Income Tax Jeopardy Collection and Garnishment Review; Appeal Under Federal Courts Rules / Motions Heard and Judgment on Review of Jeopardy Collection and Garnishment Orders (final Disposition)

Legal Issues

  1. 1 Whether the Minister fulfilled the duty of frank and full disclosure in the ex parte jeopardy collection application
  2. 2 Whether delay in payment would jeopardize collection of assessed tax debt
  3. 3 Whether corporate veils of related companies should be lifted to permit garnishment

Ratio Decidendi

The Court found the Minister fulfilled the duty of frank and full disclosure, the evidence established the 2007 transactions were artificial tax planning producing an apparent capital loss and the related companies were alter egos used to defeat tax obligations; the applicants failed to show reasonable grounds that collection would not be jeopardized by delay; lifting the corporate veil and issuing a final garnishment order was justified; the appeal of the prothonotary was moot due to waiver and was dismissed.

Court Disposition

Applicants' motions dismissed; final order of garnishment granted; costs awarded jointly and severally against 9183-4507 Québec Inc. and 9183-4564 Québec Inc.

Orders

  • 9183-4507 Québec Inc.'s motion to review the jeopardy collection order of December 16, 2013 is dismissed
  • 9183-4564 Québec Inc.'s motion challenging garnishment orders of December 19, 2013 is dismissed